ISLAMABAD: The Federal Board of Revenue (FBR) successfully recovered Rs23 billion from 16 major banks in a single day on February 21, 2025, following the Sindh High Court (SHC) ruling in favor of the Windfall Tax.
A Major Taxation Milestone
According to informed sources, this decisive action was driven by Prime Minister Shehbaz Sharif, with active collaboration from the State Bank of Pakistan (SBP) governor, Attorney General for Pakistan, FBR chairman, and a dedicated legal team. The government’s strategy aimed to curb legal loopholes long exploited by corporate giants to evade taxes.
The recovery came just a day after the SHC’s Constitutional Bench dismissed financial sector petitions challenging the Windfall Tax, imposed under Section 99D of the Income Tax Ordinance, 2001.
“For decades, Pakistan’s wealthiest individuals and institutions have delayed or avoided taxation through constitutional petitions, shifting the burden onto the poor and middle class. This time, however, the tide has turned,” a source said.
The 26th Constitutional Amendment, which led to the formation of Constitutional Benches in the Supreme Court and High Courts, was highlighted as a game-changer in fast-tracking crucial tax cases.
Breaking the Cycle of Corporate Tax Evasion
Historically, corporate giants hired top legal experts to challenge new tax laws, while the FBR struggled with limited resources, relying on underpaid and overburdened lawyers. This imbalance led to prolonged court battles, forcing governments to increase indirect taxes, disproportionately affecting low-income groups.
Determined to break this cycle, Prime Minister Shehbaz Sharif personally allocated funds to ensure the FBR had strong legal representation. The government is now closely monitoring all major tax cases to prevent unnecessary delays.
What is the Windfall Tax?
The Windfall Tax under Section 99D, introduced via the Finance Act 2023, allows the government to tax up to 50% of excessive, unexpected profits made by certain sectors due to economic anomalies.
Between 2021 and 2023, Pakistan’s economy faced extreme instability, with the rupee depreciating from Rs168 per US dollar in 2020 to Rs286 in 2023. This led to artificial demand for foreign exchange, which banks exploited by profiting from the widening gap between interbank and open market rates.
To counter this, the government issued SRO 1588(I)/2023 on November 21, 2023, imposing a 40% tax on foreign exchange income earned by banks over the past two years.
Expanding the Crackdown on Elite Tax Evasion
With the successful enforcement of the Windfall Tax, the government is now shifting focus to recover long-stalled revenues from other elite-targeted taxes, including:
- Super Tax (Sections 4B & 4C)
- Tax on undistributed reserves
- Capital Value Tax (CVT) on foreign assets
- Tax on deemed income from unutilized real estate
- Tax on inter-corporate dividends
These measures, previously stalled in legal battles, are now being aggressively pursued with additional legal resources to ensure elite tax dodgers cannot manipulate the system anymore.
A Paradigm Shift in Pakistan’s Taxation Framework
The FBR’s swift recovery of Rs23 billion marks a turning point in Pakistan’s taxation system. The government has sent a clear message:
“The days of tax evasion through legal manipulation are over. Taxation must be fair and must not disproportionately burden the poor and middle class. This is just the beginning of a stronger, more transparent tax regime.”
